TOKYO, Nov 16 (Reuters) - The yen steadied in early Asian
trading on Friday after plunging to a six-and-a-half month low
against the dollar in the previous session on expectations a new
Japanese government would put pressure on the Bank of Japan to
ease further.

Shinzo Abe, leader of the main opposition Liberal Democratic
Party and likely to be Japan's next leader, called on Thursday
for the country's central bank to adopt interest rates of zero
or below zero to spur lending.

The dollar has rallied more than two percent against its
Japanese counterpart over the past two sessions after Japanese
Prime Minister Yoshihiko Noda said he was ready to dissolve
parliament's lower house on Friday for an election on Dec. 16.

"The substantial weakening of the yen in the past 48 hours
has a lot of people rethinking their game plan," Andrew
Wilkinson, chief economic strategist at Miller Tabak & Co in New
York.

"We know that parliament's being dissolved, and the new
Liberal Democratic government, when formed, is likely to be more
proactive in trying to manipulate the Bank of Japan into further
easing, including the potential for moving short-term interest
rates negative," he said.

"It seems like perhaps the makings of a shift in the value
of the Japanese yen," he said.

But while further yen weakness in coming days is possible,
there has been no significant change in yen flows and yield
differentials between the U.S. and Japan, Tohru Sasaki, FX
Strategist at JPMorgan.

Therefore, the dollar's current rally does not change the
medium-term view that the pair will eventually fall back to
below 80 yen again, Sasaki said in a note to clients on Friday.

"If current yen weakness is just because of speculation
caused by the comments from PM Noda and possible next PM Abe, it
is unlikely to be sustainable," he said.

The BOJ is set to hold steady at a policy meeting next week.
It might also defy market expectations of action next month and
hold off on any further monetary stimulus until early next year
to size up the policies of a new government, sources say.

The dollar rose to as high as 81.46 yen on Thursday
on trading platform EBS, its highest level since late April. It
last traded at 81.14 yen, slightly down from late U.S. trade.

The yen also took a breather against the euro, which was
slightly down at 103.70 yen after rising to a
two-week high of 104.00 yen on Thursday.

Against the dollar, the euro held steady at $1.2780,
staying well above Tuesday's two-month low of $1.2661.

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